Often you will see a “Monthly Minimum Fee” on your merchant statement. You may see an abbreviation such as “mth min” instead. These fees are usually an odd amount. For example, you might see $16.23 one month and $19.15 the next month. Although these statement charges are often complicated, I’d like to try to simplify the concept so you can better understand your statement.

Here is a basic definition of monthly minimum fee: The credit card processor says to the small business owner, “You are going to pay us at least $25.00 a month in qualified transaction fees.” The standard monthly minimum fee for most processors is $25.00, although it may vary slightly. This guarantees that the processing company is going to get a certain amount of fees every month.

Consider the following examples to further explain:

  • You process $10,000 worth of credit card transactions in a month. Your qualified rate (which I’ve discussed in other posts) is 2%. $10,000 x 2% = $200. For that month, you won’t see any monthly minimum charge since you have $200 of qualified transaction fees.
  •  Now consider a smaller business who processes $1,000 in transactions for the month. $1,000 x 2% = $20. In this case the monthly minimum charge will be $5. $25 minus $20 qualified transaction fees is $5.
  •  An even smaller business might process only $500 per month. $500 x 2% = $10. The monthly minimum charge for this month would be $15.00. A micro-merchant is a smaller business such as a hot dog stand, flea market, part time crafts, etc., who processes less than $2,000 per month in volume. If you are in this category, you should use a mobile processing account rather than a traditional merchant account. A mobile processing account, a card swiper on your phone, can give flat rate pricing with a 2.5% or 3% charge for each transaction. There are no monthly fees or additional transaction fees. Although this kind of account is not a good choice for larger merchants, it is a better option for smaller businesses.

A business who processes $3,000 to $7,000 per month in volume and still pays a monthly minimum charge is probably not on the correct pricing structure. If this describes your business, you are probably on interchange plus or cost plus pricing. On interchange plus pricing, your volume would need to exceed $10,000 to avoid the monthly minimum charge. You should consider a different price structure; I’ve discussed this subject more fully in other posts.

You may go to http://go.transactionexpert.com/analysis to secure our help for your business pricing structure. Upload a picture of your statement; send it to us; we will get right back to you with a free cost analysis spreadsheet showing a breakdown of your current structure. This will give you a better idea of your needs and help you compare to our pricing structure. We will go one step further by sending a local transaction expert to follow up with you and answer any questions you may have.

James Shepherd

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